In the Audit of Notes Payable, an Auditor Testing the ASB

question 39

Multiple Choice

In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would:

• A)read directors' and finance committee's minutes for authorization of financing transactions.
• B)select a sample of paid notes and trace interest expense to the general ledger account.
• C)select a sample of paid notes and recalculate interest expense for the period under audit.
• D)select a sample of notes payable and vouch cash receipt to the bank statement.

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Definitions:

Fixed Asset Turnover

A financial ratio that measures a company's effectiveness in generating revenue from its fixed assets, such as property, plant, and equipment.

Sales

The activities involved in selling goods or services in return for money or other compensation.

Beginning Fixed Assets

The value of a company's long-term tangible assets at the start of a fiscal period.

Fixed Asset Turnover

A efficiency ratio that indicates how well a company uses its fixed assets to generate sales.